Economic Crime (Transparency and Enforcement) Act 2022
If you own land through or transact with an entity registered outside of the UK, you may soon start to see a new restriction on the title register to that entity's property. We explore where that has come from and what it means for you.
The Economic Crime (Transparency and Enforcement) Act 2022 (ECTA) came into effect on 1 August 2022, in the wake of Russia's invasion of Ukraine and government concern over transparency of overseas investments in UK real estate. Prior to ECTA, only companies registered at Companies House were required to disclose their beneficial ownership in the UK. Traditionally, this privacy has been one of the key drivers (in many cases along with tax treatment) for use of entities in other jurisdictions where such details do not need to be disclosed.
Whilst it is outside the power of the UK's government to change what information other jurisdictions require to be made public, it can exercise some level of control over dealings of land in the UK and it is doing so by requiring HM Land Registry to place a new restriction on the title register to all property owned by legal entities governed by the law of a country or territory outside the United Kingdom (known as OEs). This will refer to the application of Schedule 4A of the Land Registration Act 2002. The restriction prevents registration of transfers, leases for more than seven years, or charges, unless the OE is registered, exempt, or the disposition is made in certain specified circumstances (including where the transfer of land owned by an OE is made in pursuance of a contract made before the restriction was entered onto that OE's title. ). There are two forms of restriction:
- For OEs who have become registered proprietor pursuant to an application made between 1 January 1999 and 31 July 2022, which will take effect from 31 January 2023; and
- For OEs who have applied to become registered proprietor on or after 1 August 2022, which will take effect immediately.
So, what does this require? For the vast majority of OEs, it means registration under ECTA and an ongoing annual duty to update the information held by Companies House.
The register is held by Companies House. An OE must take steps to identify its beneficial owners and submit this information to a registered verification agent who will make the application to Companies House for entry on the register. Crucially, registration at Companies House will provide an OE with an OEID number which can be used to prove registration. From 5 September 2022, HM Land Registry will not process any applications to register acquisitions by an OE unless an OEID is provided. Any such applications will according to its own guidance be rejected outright by HM Land Registry, which means that priority for that application will be lost.
Equally, OEs which already hold land must register for an OEID as they will not be able to transfer, charge or grant a lease for more than seven years of such land after 31 January 2023 without being registered. This will also be a criminal offence which can cause officers of an OE to be subject to a fine or imprisonment.
Trowers can help with the necessary contract wording to help you navigate this emerging area of law.